Central Banks Signal Higher For Longer
Central banks warned that higher energy costs could lift inflation and argued against near-term rate cuts, which can reduce demand for non-yielding assets such as Silver. Federal Reserve Chair Jerome Powell said on Wednesday that higher energy prices will raise inflation in the near term, but the effects are uncertain. XAG/USD was flat around $72.80, with price below the 20-day EMA near $81.22 and resistance at $76.50 and $81.00; a break above $81.00 could target $84.00. Support sat at $70 and Thursday’s low of $65.51, while RSI fell below 40.00 for the first time in 11 months. Given the ongoing geopolitical tensions in the Middle East, we see significant upward pressure on oil prices, which directly fuels inflation concerns. This situation makes central banks, including the Federal Reserve, hesitant to consider lowering interest rates. For a non-yielding asset like silver, a high-interest-rate environment creates a major headwind, as investors can get better returns elsewhere. The Fed’s comments this past Wednesday reinforce our belief that interest rates will remain elevated for longer than anticipated. We saw this directly after the latest global CPI figures for February 2026 showed a surprising re-acceleration to 4.1%, undoing the disinflationary progress made in late 2025. This makes holding silver costly and diminishes its appeal for now.Technical And Strategy Implications
From a technical standpoint, the price remains firmly below the 20-day moving average, currently acting as resistance around $81.00. The persistent selling pressure from the mid-$90s suggests the bearish trend is still intact. A break below the immediate support at $70.00 would open the door for a retest of the recent low of $65.51. For the coming weeks, we believe traders should consider bearish positions. Buying put options with strike prices at or below $70.00 could provide a well-defined risk strategy to capitalize on further weakness. This approach allows for participation in a downward move while limiting the potential loss if the geopolitical situation causes a sudden safe-haven rally. However, the closure of the Strait of Hormuz has also caused market volatility to spike, with the VIX index jumping to over 25 for the first time this year. This suggests that a strategy of buying volatility, such as a long straddle, could be prudent. Such a position would profit from a large price swing in either direction, which is a distinct possibility given the unpredictable nature of the conflict. We are also watching the Gold/Silver ratio, which has widened to over 90:1, a level historically indicating that silver is undervalued relative to gold. While this might normally suggest a buying opportunity, the powerful headwinds from hawkish monetary policy are currently overriding this historical relationship. Therefore, we view any strength in silver as an opportunity to initiate fresh bearish positions until the fundamental picture changes. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
